Employment and Unemployment

Total Population age 16 and over Employed Employed Employees Self-employed Unemployed Unemployed New entrants Re-entrants Lost last job Quit last job Laid off Not in Labor Force Not in Labor Force Armed forces Household workers Students Retirees Disabled persons Institutionalized Discouraged workers Civilian labor force

UNEMPLOYMENT Measurement of Unemployment, Jan 2005 Employed Not in labor force Under 16 and/or institutionalizedTotalPopulation Jan 2005 estimate 295,412,000 Civilian Labor force147,979,000 70,575,000 76,858,000 Unemployed 7,737, ,241,000 Unemployment Rate 5.2% Labor force participation rate 65.8%

If the total population is 280 million, and the civilian labor force includes 129,558,000 with jobs & 6,739,000 unemployed but looking for jobs, then the unemployment rate would be ___%. Unemployment Rate = Unemployed Labor Force 4.9 6,739,000 / 136,297,000 x 100 = 4.9% 7,737, ,979,000X100 = 5.2% X 100

1.8 million persons who were marginally attached to the labor force in January, about unchanged from a year earlier. 1.8 million persons who were marginally attached to the labor force in January, about unchanged from a year earlier. These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed—they did not They were not counted as unemployed—they did not actively search for work in the 4 weeks preceding the survey. Discouraged workers, a subset of the marginally attached, were not currently looking for work specifically because they believed no jobs were available for them. Discouraged workers, a subset of the marginally attached, were not currently looking for work specifically because they believed no jobs were available for them. The number of discouraged workers, at 515,000 in January, was slightly higher than a year earlier. The number of discouraged workers, at 515,000 in January, was slightly higher than a year earlier. The other 1.3 million marginally attached had not searched for work for reasons such as school or family responsibilities. The other 1.3 million marginally attached had not searched for work for reasons such as school or family responsibilities. Persons Not in the Labor Force

Three Types of Unemployment Frictional Frictional – “temporary”, “transitional”, “short-term.” (“between jobs” or “search” unemployment) Frictional unemployment signals that “new jobs” are available and reflects “freedom of choice”. These are qualified workers “transferable” skills. Examples: 1.People who get “fired” or “quit” to look for a better one. 2. “Graduates” from high school or college who are looking for a job. 3. “Seasonal” or weather-dependent jobs such as: “agricultural”, “construction”, “retail”, or “tourism.” [lifeguards, resort workers, & migrant workers.] “agricultural”, “construction”, “retail”, or “tourism.” [lifeguards, resort workers, & migrant workers.]

Three Types of Unemployment Structural “technological” “long term”. “structure”“skills obsolete”. Structural – “technological” or “long term”. basic changes in the “structure” of the labor force which make certain “skills obsolete”. √ Automation √ Automation may result in job losses. Consumer taste may make a good “obsolete”. The auto reduced the need for carriage makers. Farm machinery reduced the need for farm laborers. √ “Creative destruction” √ “Creative destruction” means as jobs are created, other jobs are lost. Jobs of the future destroy jobs of today. Frictional and Structural make up the “natural rate of unemployment”. “These jobs do not come back.” “Non-transferable skills” – choice is prolonged unemployment or retraining.

“These jobs do come back.” Three Types of Unemployment √ Cyclical fluctuations” caused by deficient demand for goods and services √ “Durable goods” jobs are impacted the most. Purchase of these durables can be postponed because they can be repaired. Cyclical – “economic downturns” in the business cycle. “Cyclical unemployment” is “real unemployment”.

Survey on Unemployment BLS calls 60,000 households every month. They ask three questions: 1.Are you working? If the answer is no, 2. Did you work at all this month-even 1 day? You are a member of the LF if “yes” on 1 or Did you look for work during the last month? [agency, resume, interview] A “yes” counts you as part of the LF. A “no” means you are not counted. You are a “discouraged worker.” The labor force consists of the employed and unemployed.

Full Employment Full employment is less than 100% because the economy is dynamic—frictional and structural unemployment are often inevitable. The Full employment rate of unemployment or the Natural Rate of Unemployment (NRU) is present when the economy is producing its potential output. NRU is present when the number of job seekers equals the number of job vacancies. NRU is present when the number of job seekers equals the number of job vacancies. When labor markets are in balance, there is lag time. Workers seeking jobs and those retraining are the cause of the lag. The Natural Rate of Unemployment exists when the cyclical unemployment is zero.

Economists in the 1980’s thought the NRU was 6%. Today, the figure is 4 to 5%. Why? Economists in the 1980’s thought the NRU was 6%. Today, the figure is 4 to 5%. Why? √ Fewer workers available as baby boomers age. √ Workers find jobs more quickly—the internet is a source of information. √ Changes in the welfare system put more people in the labor force. √ Doubling of US prison population removes relatively high unemployment individuals from the labor force. The NRU is not static; the economy will want to move to its potential output and cyclical unemployment can interfere. When labor markets are tight, firms quickly retrain structurally unemployed and workers who previously were not in the labor force come back, the economy can operate below the NRU.

Natural & Actual Unemployment Rates

Europe’s Natural Unemployment Rate is 8%-11% 1. Labor unions are stronger 2. There are more restrictions on firing workers which makes employers reluctant to hire them in the 1 st place. 3. Much more generous unemployment insurance 4. Sweden-(free college); unemployment for 2 years with 95% pay; and maternity leave is for two years.

Another Look at the Natural Rate

Hottest Jobs 5 Jobs for Independence 1. Computer engineer 2. System analyst 3. Psychologist 4. Clinical social worker 5. Marketing, advertising, public relations manager “Econ, Econ” 5 Jobs for the Money 1. Physician/surgeon ($156,000/$200,000) ($156,000/$200,000) 2. Airline pilot ($95,794) ($95,794) 3. Computer engineer ($70,000) ($70,000) 4. Management consultant ($60,000) ($60,000) 5. Lawyer($58,000) 6. Teaching - oh!!

In 1960, 60% of jobs could be held by unskilled or semi-skilled workers. Today, it is only 15%. JOB FACTOID!

Hottest Jobs These jobs will have the most net gains through 2012 (in 1000’s) 1.Teachers K-12724,000 2.Registered Nurses623,000 3.Post secondary teachers603,000 4.Customer service reps458,000 5.Computer support420,000 6.General Operations Manager376,000 7.Sales reps356,000 8.Truck drivers337,000 9.Software engineers307, Accountants and auditors205,000 Hottest Jobs These jobs will have the most net gains through 2012 (in 1000’s) 1.Teachers K-12724,000 2.Registered Nurses623,000 3.Post secondary teachers603,000 4.Customer service reps458,000 5.Computer support420,000 6.General Operations Manager376,000 7.Sales reps356,000 8.Truck drivers337,000 9.Software engineers307, Accountants and auditors205,000 Bureau of Labor Statistics

1.Computer Engineering $52,169 2.Chemical Engineering $52,038 3.Electrical/Electronics Engineer $50,566 4.Computer Science $50, Mechanical Engineering $49, Mgmt Info Sys/Bus. Data Processing$42, Economics/Finance $42, Civil Engineering $41, Accounting $42, Management Info Sys $40, Teaching $40, Nursing $37, Marketing/Marketing Mgmt. $36, Business Admin/Mgmt $36, Communications $28, Psychology $27,000 Top Paying College Majors for 2004

Fastest Growing Fields These jobs will add the largest percentage of positions through Network Systems and Communication Analysts57% 2.Physician Assistants48.9% 3.Software Engineers45.5% 4.Physical Therapist Assistants44.6% 5.Fitness Trainers44.5% 6.Database Administrators44.2% 7.Dental Hygienists43.1% 8.Hazardous material removal workers43.1% 9.Computer Systems analysts39.4% 10.Environmental Engineers38.2% Fastest Growing Fields These jobs will add the largest percentage of positions through Network Systems and Communication Analysts57% 2.Physician Assistants48.9% 3.Software Engineers45.5% 4.Physical Therapist Assistants44.6% 5.Fitness Trainers44.5% 6.Database Administrators44.2% 7.Dental Hygienists43.1% 8.Hazardous material removal workers43.1% 9.Computer Systems analysts39.4% 10.Environmental Engineers38.2%

The FEDS Pay Well Many US Government jobs pay a higher average salary than what the private sector pays. (in thousands of dollars) FED Gov’t pays Private Sector pays 1Astronomer$104$86 2 Financial Managers Economist Chemist Electrical Engineer Public Affairs Librarian Land Surveyor Nurse Secretary

Economic Growth The Business Cycle Unemployment Inflation CPI Redistributive Effects of Inflation Anticipated Inflation Effects of Inflation on Output Key Terms FranceFrance U.K.U.K. GermanyGermany U.S.U.S. JapanJapan GLOBAL PERSPECTIVE Unemployment Rates 5 Industrial Nations Source: Economic Report of the President, 2003